Swedish truck makers set sights on Russia

The Swedish truck maker Volvo signed an agreement at the St. Petersburg Economic Forum to open a second truck factory in Russia. But its number one rival – Scania – is still hesitating over whether to set up an assembly plant in the

Foreign car manufacturers are racing to build their assembly plants in Russia, as they compete for a slice of the country's growing demand for their products.

But Sweden's Volvo is the only foreign truck maker to set up a manufacturing plant in Russia. At the St. Petersburg’s economic forum, the company announced it will open a second plant – in the Kaluga region worth $ US 134 MLN. It expects to finish the construction by 2009, and produce 15,000 trucks annually.

Volvo says it sold 2,000 trucks in Russia last year and expects this to grow.

“Russia is a very interesting market. We have a long history already and we want to sustain that. We could, of course, get locally produced truck products. We hope to be even closer to the customer with that. And we hope to improve our results. How that will compare to competitors – only time will show. But of course we are ambitious and will go for nothing less than first position among the western brands,” Lars Himmer, Deputy Director of Volvo Vostok, says.

However, Volvo’s number one rival – Swedish Scania – is already selling more than 4,000 trucks annually.

Although Scania is number one on the Russian truck market, it doesn’t have any truck assembly facilities in the country. Most of its trucks for sale in Russia are put together in either Hungary or Brazil.

The Head of Scania says it is considering opening a Russian plant, but there are too many things to be taken into account.

“When we do that, we need to know that the market takes about 10,000-12,000 units a year in order to justify the investment. And it is also so that we need to know that there are certain suppliers there for components and materials from Russian suppliers that we can use,” explains Leif Ostling.

The company's sales in the country are growing 100 % a year, so it's not a question of if, but when the company will set up a factory in Russia. And Leif Ostling said the company may take that decision before the end of the year.